Takeda Pharmaceutical Co Ltd (TAK) 2016 Q1 法說會逐字稿

Good day, everyone and welcome to the conference call of Takeda Pharmaceutical Company Limited. The conference call today is held by some presentation material available at the Company's website and may we suggest that you visit the website to see presentation materials on the screen if you don't yet have printed copy to hand.

The conference call is scheduled to start at 4:30 PM Japan Standard Time.

Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks delays, uncertainties and other factors not under the Company's control, which may cause actual results, performance or achievements of the Company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rate, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

During the presentation from the Company all the telephone lines are placed for listening-mode only and a question-and-answer session will be held after the presentation. This conference call is being broadcasted through Internet live but only for a listening mode.

Now we start the conference. Ms. Higuchi, please go ahead.

(interpreted)Thank you very much for your participation in the conference call of the first quarter financial results for fiscal 2015 of Takeda Pharmaceutical Company Limited. My name is Noriko Higuchi, IR Head.

Now, please let me introduce today's presenters and the panel. Christophe Weber, President and CEO; Rudolf van Houten, acting CFO; Azmi Nabulsi, Head of R&D Strategic and Professional Affairs. First, we'd like to start with the presentation on strategic road map update and first quarter financial results for fiscal year 2015 by Christophe Weber and by Rudolf van Houten respectively. After that we will have the question-and-answer session.

Now we'll start the presentations. Please have the presentation materials at hand. Now, we'd like to start with the presentation by Weber.

Thank you. Hello, everyone. It's a real pleasure to present our Q1 results. First, I would like to introduce

Rudolf van Houten. Rudolf is our current Acting CFO. He is also our Group Finance Controller, very experienced as a CFO in his previous company and also worked many years in Roche in the past. So I'm really pleased that we could nominate him as acting CFO very rapidly and we are, of course, actively searching for our future CFO.

I also want to -- like to stress out that we are very much committed to our transformation. The departure of Francois-Xavier Roger will not derail at all any programs that we initiated. So you will see in our presentation that this is very much in line with what we have presented in the past and we are just updating how we are executing our plan and our transformation.

If I go to slide number four, this is our strategic roadmap that you have seen now a few times. I just want to highlight a few events that we can discuss further later. You have seen that we have issued our improvement plan in Japan for the review of our promotional materials. So that's something that is important. For our reputation and for our future competitiveness we will execute this plan from August onwards. We talked a lot about talent development and people. It was one of the topics during the last shareholder meeting. We have now a class plan that we are starting to execute. Of course, it will take time to reinforce our talent pool and succession planning, but this is something that is now in execution. I am very pleased about that.

Regarding R&D, of course one of the key event of the quarter is that we have filed Ixazomib in United State followed by Europe and we have had the fast track review in both cases. So I think this is important. This was an expected step and now we are of course preparing for the launch of Ixazomib and this would be after Entyvio it would be the second global launch for Takeda. And we are planning really to accelerate this global launch. So we'll launch not only in US and Europe but very rapidly in other countries in the world.

Regarding business performance, we are very pleased about our sales evolution during this quarter. You will see that it's very much driven by Entyvio which is progressing well. Velcade also is still growing. After 20 years on the market treating patients with multiple myeloma and Velcade today is Takeda's biggest product.

We are able today of course to confirm our annual guidance. I'm sure we will discuss about our Q1 results a bit later with Rudolf and our OpEx. But what I want to say hear is that we are very committed to our annual guidance.

So if you go to slide number 5, in a nutshell we are growing underlying revenue 6.1% in Q1, strong growth driven by innovative products and Value Brands. Our operating profit is declining by 22% and our underlying core earning is flat. We have some relatively high OpEx level in Q1. This Q1 OpEx level does not reflect the trend that we will see during the years. In fact, we'll explain that usually on sales and marketing. We started to ramp up our sales and marketing investment in the second part of last year in order to launch new product. So obviously we are comparing now with Q1 versus Q1 last year, which was relatively low in this area for example, but we will detail more of that.

Project Summit, we are very much committed to Project Summit. We will continue to execute the cost efficiency programs that we have designed and our EPS is minus 26%. Our core underlying EPS is flat for the quarter.

So I would like now to invite Rudolf to present more in detail these results.

So thank you, Christophe. My name is Rudolf van Houten. I'm the Group Financial Controller and the Acting Chief Financial Officer and so today I'll take you through the consolidated Q1 results for the Company.

So if you can please all turn to slide number 7. This slide shows our reported income statement for the quarter. And starting at the top, you will see that revenue was up by JPY35 billion, which represents an increase of 8.5% versus the prior year. If you look at that number, ethical sales were actually up by JPY35.4 billion or an increase of 9.5% and that was driven by the Entyvio launch, which contributed almost JPY16 billion of sales and also continued strong performances by Velcade and Dexilant. And of course as you know these are reported numbers and they do have an element of FX in them.

On a geographical basis, our sales outside of Japan were very strong, They were up 16%, double-digit increases in the US driven by the newly launched Entyvio and Contrave and continued robust growth in Brintellix and Dexilant.

If we look at Japan, Japan was down by 2.3% and that reduction in Japan was almost exclusively due to generic pressure on Blopress. If we exclude the impact of Blopress, Japan was actually up for the quarter.

Our consumer health business posted a very strong performance. Sales were up 15% or JPY2.5 billion. However, this was offset by a reduction in our other segment, which was down by JPY2.8 billion and this reflected primarily the divestment of the Mizusawa business in April of 2015.

Continuing down the P&L, our gross profit was up by 11% versus the prior quarter. Since our gross profit grew faster than our sales, we had an uplift in our gross margin versus Q1 of last year. Q1 last year, our gross margin was 71.3% and that increased to 72.9% in this quarter. So that represents a 1.6 point increase versus the prior quarter. If we break that 1.6 point increase down, 1.4 of that was related to FX and 0.2 of that was related to product mix. And the product mix represents primarily the divestiture of the Mizusawa business as I previously mentioned.

So, continuing down to P&L, sales and marketing expenses, as Christophe has already alluded to, were up by JPY15.8 billion for the quarter and this represents primarily the new money to support product launches, particularly Contrave in the US and Takecab and Zafatek in Japan. G&A expenses were also up for the quarter, JPY9 billion, and that reflects mainly increases in IT and procurement.

On the IT side, we are investing in building common global systems, including ERP systems while on the procurement side, we're strengthening our organization in order to continue to drive Project Summit savings. Procurement actually represents the majority of our Project Summit savings for the next two years.

Continuing down, R&D expenses, they were up for the quarter. However, this is a timing issue and we are still committed to reaching the full year lower target that was previously communicated. Amortization and impairment losses on intangible assets were up by JPY3 billion versus last year. This reflects primarily a decision in a JPY4 billion impairment related to a legal decision in Canada which allows the launch of generic competitors for Omnaris.

Continuing down, other income was down by JPY16 billion versus last year. You may recall from last year that we sold a piece of property in Japan and realized a JPY15.3 billion gain on the sale of that property. So that was included in the Q1 2014 results, but of course was not repeated in the Q1 2015 results. And finally, other expenses were down and again in 2014 we had termination costs related to TAK-700 of about JPY4.5 billion and those were not repeated in 2015.

So then as Christophe has already mentioned, our operating profit was down. We were down JPY14 billion or about 22% for the quarter and our net income and EPS were both down 26% primarily due to the aforementioned higher operating expenses coupled with the impact of the gain on the sale of land which was included last year, but was not repeated this year.

So if you can please turn your attention to slide number 9. Slide number 9 shows the bridge from reported revenue to underlying revenue. So if you recall from what I just said on the previous slide, our reported revenue was up by 8.5% for the quarter. However, there are two main adjustments that we make in order to derive the underlying revenue. The first adjustment is to eliminate the impact of foreign exchange. And you can see that we have restated both this quarter and last quarter at the rates that are included in the footnote at the bottom of that slide.

In addition to FX, we also have eliminated the impact of acquisitions and divestitures and the main one there that you see was related to Q1 2014 and that's the divestiture of the Mizusawa business which we had in Q1 2014 but did not have in Q1 of 2015. So when you make those adjustments, our underlying revenue growth was 6.1% versus the reported number of 8.5%.

So if you please turn your attention now to slide number 10, this slide shows the breakdown of our underlying revenue growth into the impact coming from new products versus the impact coming from the base business. And from the previous slide, we saw that underlying revenue increased by 6.1%. If you break that down, we had an 8% increase coming from the growth of new products and then this growth in new products was partially offsets by a 2% decline coming from the growth -- of decline in our Japan business which reflects primarily generic pressure on Blopress.

Perhaps if we turn to the next slide, slide number 11. Slide number 11 shows this in a little bit more detail. And it breaks down -- it shows the product breakdown of the two categories that we introduced on the previous slide. So if you look at the top part of the slide that shows the impact of new products on our sales. And you can see that on an underlying basis Entyvio was the largest growth driver of new products, accounted for almost half of the growth in new products.

However, in addition to Entyvio, Azilva and Brintellix have also been key drivers supporting our growth while the anti acid treatment Dexilant benefited from regional expansion into emerging markets. Japan also saw a significant boost in sales of the hyperlipidemia treatment Lotriga.

If you now focus on the bottom side of that chart, you can see the main products which impacted our base business. And you can clearly look at the very first line. There is a reduction in Candesartan which has the brand name Blopress in Japan which has come under significant pressure since generics came into the market at the end of last year. And all other base business products combined resulted actually in an increase.

So if you now please turn to slide number 12. This slide illustrates the steady increase in the sales of Entyvio. So as of June of this year we have achieved a moving annual total sales of over JPY40 billion which is a great performance considering that this product only came on to the market in June of last year and it positions us very well towards our peak sales target of over JPY2 billion.

The US continues to account for the majority of sales, but we are also very satisfied with the uptake of Entyvio in Europe. Earlier this month, NICE in UK announced that they now recommend Entyvio in Crohn's disease. Following from their previous recommendation in UC. We remain very confident in this product as a real game changer for patients with IBD and we are committed to indicating -- initiating appropriate studies to further assess the efficacy and safety of Entyvio, including a head to head study with Humira that commenced dosing this month. Sales of Entyvio are going so well that we are accelerating an increased supply capacity over our initial plan.

So if you could please turn to slide number 13. This slide shows the moving annual total sales of two more important innovative growth drivers for us, Brintellix and Adcetris.

As you can see from the charts, both of these products continued to show good momentum and a strong growth curve. And we are confident that these products will continue to be growth drivers for the Company going forward.

So please turn to slide number 14. This slide gives a breakdown of our underlying sales growth by region. The largest growth driver in Q1 was the US up almost 16% driven by Entyvio and Brintellix. The US was followed by emerging markets which were up by 8% where Russia and China were particularly strong. Europe and Canada were up almost 7% which was driven by growth of specialty products Entyvio and Adcetris. And as I already mentioned before, Japan was down year on year as a result of increasing generic penetration, particularly with respect Blopress.

So now let's turn to slide number 16 and this slide will show the reconciliation from our reported operating profit to our underlying core earnings. And as you may recall from my first slide, I think it was slide number seven, the reported operating margin was down by 22%, and you'll see that at the top of the slide. We then have a number of reconciliation items to get to core earnings and ultimately underlying core earnings. The largest reconciliation item is the amortization of intangible assets which was roughly in line with the prior year.

In addition, in Q1 2015 we recorded the JPY4 billion impairment related to the legal decision in Canada, allowing the launch of generic competition for Omnaris, which I mentioned previously. And finally, I should point out again that in Q1 of 2014, we had a very large gain on the sale of land which we've excluded from the underlying core earnings analysis. So after taking into account FX and divestitures and acquisitions the underlying core earnings was relatively flat versus the prior year.

So please turn your attention now to slide number 17. This slide shows the evolution of core earnings versus Q1 of last year. So as we previously discussed, we had very strong revenue growth this quarter which of course resulted in higher gross profit. However, this higher gross profit was offset by higher operating expenses mainly the investment in sales and marketing to support new product launches.

In addition to that, our G&A expenses were up and as I mentioned previously, this was primarily related to investments in IT and procurement. And again, both of these functions are enablers for our future Project Summit savings strategy.

And finally, R&D expenses in Q1 have increased, specifically in oncology and vaccines, but again this is more a timing issue than anything else and that resulted in the flat underlying core earnings for the quarter. However, as Christophe has pointed out, I would also like to emphasize that the comparisons are all against Q1 of last year. If you compare to Q4 of last year, which was our expense run rate that we exited the year with, you can see that both sales and marketing and R&D expenses have actually declined.

G&A expenses have increased slightly, again as a result of investments, particularly in procurement and IT. And as I said previously, we're committed to the full-year guidance of lower R&D expenses versus the prior year.

So now please turn to slide number 18. And this slide shows a reconciliation from our reported net profit to our underlying core net profit, and again many of the reconciling items are the same as I explained a couple of slides back, the largest being the amortization of intangible assets, the gain on the sale of land in 2014 and then the impairment of Omnaris in Canada. And on an underlying basis, core net profit and underlying core net profit and underlying core EPS were flat for the quarter.

So if you can please turn to slide number 20 now and this slide shows our reported cash flow for the quarter. Operating cash flow was significantly ahead of last year, primarily due to better working capital management. During Q1 of 2014, working capital consumed JPY50 billion in the business whereas in Q1 2015 working capital consumed about JPY19.5 billion. Capital expenditures were roughly in line with last year while the acquisition of intangible assets for the first quarter were below last year. And that resulted in an operating free cash flow of JPY3 billion versus negative JPY28 billion versus last year.

After accounting for investing activities and financing activities, our net decrease in cash and equivalents for the quarter was JPY88.3 billion and that JPY88.3 billion was effectively funded by a reduction in the cash balance on our balance sheet. And that's reflected on the following slide, slide number 21.

And this slide shows our cash and leverage position at the end of June. And you can see that our gross debt is in line with what we've reported in the last quarter. But our cash and equivalents are down reflecting the usage of cash which I showed in the prior slide.

I should also point out that we have sufficient cash on hand to cover payments related to the Actos settlement. Whereas we've had still not made the payment, we anticipate that it will be paid out sometime during this fiscal year.

So then please turn your attention to slide number 23, which is my final slide for today. And I would like to give you an update on the progress of Project Summit and we will continue to execute on this project going forward. So we don't anticipate any change in strategy.

In Q1, we achieved a JPY5 billion of additional cost savings, which means we are on track to deliver the JPY20 billion, which we projected for the full fiscal year.

Execution of Summit initiatives in recent months have included the completion of the European shared services up for finance in Poland, the closure of manufacturing sites in Denmark and Norway, the continued reorganization of select commercial areas in emerging markets and Europe and the implementation of global IT and procurement organizations to facilitate our transformation going forward. And again, I would like reiterate that we remain fully committed to the previously communicated targets.

So this concludes the financial portion of our presentation today and I'd like to turn back to Christophe for some concluding comments before we take questions.

Thank you, Rudolf. So at this stage basically we are confirming our annual guidance. We have no reason to amend or to change this guidance. So low single digit for revenue growth, underlying revenue growth and higher growth for earning and EPS.

And on slide 26 we will, as I said earlier, continue to execute our strategy on transformation, very much focusing on our growth drivers which are GI, oncology and emerging market.

This is of course a very special year, this year, because it's a turnaround year first. So we want to regain some level of profitability, we want to grow our profit. This is also very specific here because we are launching new products. We have launched gathers Takecab, Zafatek in Japan, we have launched Entyvio at the end of the day quite recently and we are still launching in many countries. And we are preparing the launch of Ixazomib, which is very exciting for the organization.

And again, we will continue to be very disciplined in our execution, very resilient in order to position Takecab for long-term sales and profit growth.

So that's how I will conclude. Thank you very much for your attention.

Now we would like to take your questions. Those for you in Japanese channel, you can address you question in Japanese. If you are in the English channel, you can address your questions in English. We would like to limit the number of questions to two per person.

Atsushi Seki, Barclays Securities.

(interpreted)My name is Seki. I have two questions. First you have a new director Andrew Plump and I suppose you have R&D review. What have been the topics for R&D review and when would you be able to share the results of the review? That's my first question. And my second question is regarding Colcrys. The decline is mild, very gradual decline, but for FY 2015, do you think this trend will continue or will there be a significant change, what's the outlook? Thank you.

Thank you for your question. So, yes, we have a new Head of R&D Andy Plump. He has spend the last few months interacting with the organization discussing about our pipeline and our programs. He will share his vision about R&D in the near future, he still needs some time to review the pipeline. One specific area that we are looking at it is actually CVM and CNS because you remember that we have identified four therapy area in R&D, GI, oncology, CVM, CNS plus vaccines, so it was two candidate vaccines. We believe that CVM and CNS is probably too broad and we are looking at that precisely, so that would be one of the outcomes. But Andy will be able to share with you, I'm not sure when exactly at this stage, not before 2016. So probably in the first part of 2016, but we will confirm that in the near future.

Regarding Colcrys, what we're seeing at the moment is that the decline is very much linked to a price decrease on the marketplace more than volume decrease in our side. So with our strategy to introduce our own authorized generics plus our Colcrys brand, we've not seen unusual volume decline, but of course significant price decline. And frankly it's not easy to predict how it's will evolve because it depends on the competitivity and also what our competitor will do. But so far this is the situation. It's mainly driven by a price decline more than a volume decline of our own products.

Yamaguchi, Citigroup.

(interpreted) The first question is about (inaudible) sales. Currently you have the generic impact on the Blopress and that's why the performance is not good. But as you see the launches of the new product and now you have the improvement order, if you are wrong in new activities the efficiency in the sales and the marketing would drop. But based on the improvement order, how are you going to promote the new product and what is the timeline for you to see the improvement of your revenues in Japan. This is the first question.

And the second question is that after the filing of Ixazomib from the external view late stage asset seems to be a little bit limited. Of course, there are many in Phase I and Phase II, but not much in the late stage. So, I think it is necessary for you to acquire products from external sources, but regarding those external growth, we haven't heard much about that recently. So what do you think about this?

Thank you for your questions. This is Christophe Weber here. Regarding the [GBPU], so we don't expect our improvement plan to impact our competitiveness in the midterm or long term. Our improvement -- the improvement rather on our improvement plan thus allow us still to promote our products and it's just that we will have a very stringent review of our promotional materials, but we will be able to promote our products in the future and we will activity execute these. We are starting the execution of this improvement plan right now. So we don't believe that it will impact our competitiveness negatively in the future.

Regarding the outlook for our Japan business, eventually the new product launches will offset the generic impact. We still need some time and some months for doing that. Blopress generic penetration is high, but that's not reached its peak yet, but there is most of the pain has been there already if you like, but we are not at the peak of the generic penetration. Also because the peak of generic penetration increase all the time with new target and also our new product launches like Takecab, so far the feedback we are getting is very positive. But for example Takecab has a prescription limitation for one year and therefore we will really get the full benefit in 2016.

But progressively we will see our growth rate improving in Japan because of this dynamic of new product launches and the generic impact which will be less and less because Blopress would have been genericized very much. So that's for the Japan business unit sales.

Regarding Ixazomib and our pipeline, we are looking always at reinforcing our late-stage pipeline, especially in the area, the strategic area we have identified like GI, oncology and this is something that we are actively searching. And I can already disclose that one of the area where Andy Plump will have an impact is the reinforcement of our external partnership. That's something which was already initiated previously but something that we will accelerate into the future because we believe that the strong R&D in an organization is an organization which is able to both excel internally as well as excel in external partnership. Did I answer your question?

(interrupted) Let me confirm one thing. Do you have any idea of in-licensing acquisition of the product?

Yes, we have but we will not disclose this idea here. You will see when we do it.

Tim Race, Deutsche Bank.

This is Tim Race here from Deutsche Bank. Two questions, first just on Ixazomib, if you could just help spell out when we should get the sort of earlier indications because obviously you have got this study coming up soon and the filing. But when should we expect the earlier first line indications?

And then just a general comment, so if you could talk about the evolution of this multiple myeloma market in terms of why you think this affects when we've got CD38 is being added on top of Velcade et cetera, that would be very useful to just your perspectives.

And then a second question on Brintellix, we've seen the scripts in the US start [be flat] for a while and then started to tick up. Is that because of the cognition data that's now in the public domain and when we be filing our data to improve the label? Thank you.

Thank you. So regarding Ixazomib, I don't want to predict our regulatory success, but we had a fast track review. So with the first communication we'll probably -- the launch and the first indication will probably happen in the beginning of 2016 calendar year in the United States and later in Europe. So that's what we are preparing for. But we will see how the review goes with the FDA [in EMEA].

And we believe that of course there is a very large program supporting Ixazomib with multiple indication. Between now and 2020 we have multiple indications coming to reinforce the profile of Ixazomib. We believe that this product has a unique profile of efficacy, sustained efficacy in time and safety profile which would make it a strong proposition, especially for the maintenance therapy of patients with multiple myeloma. So that's we believe a very strong profile in order to achieve a potentially long-term treatment of multiple myeloma.

And we know that there are multiple products in competition but Ixazomib has this unique profile on efficacy and safety, oral, weekly, so it could become a very interesting product for treating patients with multiple myeloma.

On the Brintellix, actually the TRx, the prescription data does not show this plateau that we looks -- like to see on the slide here, because there have been some inventory movements, so we are satisfied with the progression of the prescription and we are in active dialog with FDA to see how we can get recognition of the commission data and how it can happen in the United States and of course that's important for the future of the product.

Ryoichi Urushihara, Nomura Securities.

(interpreted) Thank you very much for pointing me out. I have two questions about the new product, one of which is TAK-114. In order to link the value chain from Entyvio you have acquired the TAK-114, but it's sitting on that Phase II for the long time. So I'd like to understand when this product will go to the next step, I'd like to know the timing of that. And the second question is this is about the early stage. When I investigated patent situations, ASK1 inhibitor have gotten the patents one after another. Does it link to the iPS cell technologies?

Thank you for the question. I'll ask Azmi to answer all these.

This is Azmi Nabulsi. In relation to TAK-114, it's a very exciting molecule. We're very excited about it. And now it is in the developed and next phase for it is Phase IIb and that's in the planning stage and hopefully we'll be able to conduct this soon. I cannot give you an exact date because we're working on the design elements and the path forward for this molecule, but we're very excited about it. And the second question, can you repeat that for me?

For at the patent situation, we don't disclose the patent situation at this point. So we will leave that to a different setting.

(interpreted) The further development status would be disclosed when we see more progress in the pipeline.

Sakai, Credit Suisse Securities.

(interpreted) First question is disclosure of Ixazomib data. I suppose it's coming within this year and is that the right understanding as to the disclosure of Ixazomib data? And also you mentioned cash and cash level and Actos settlement. I don't know when you have actual cash out for payment some may be covered by insurance, but some hundreds of billions of money to be cashed out. And that is covered by your own cash position in your balance sheet, is that the right understanding? So you have insurance and cash on hand and that will cover settlement payment, is that right?

Thank you. This is Christophe here. We don't -- for Ixazomib I will let Rudolf answer for the cash situation. Regarding Ixazomib we will disclose the interim data at ASH, at the upcoming ASH meeting in December. That's when we will be able to disclose the first data on the product and then subsequently we will disclose data as it comes thorough the development plan. So, that's for Ixazomib data. Rudolf, do you want to comment on the cash management?

Yes. So, as you rightly point out, we do have some insurance coverage for the Actos settlement and in addition, of course, we will get some tax benefit from this as well. And so we anticipate that the total amount will be covered by existing cash on the balance sheet.

Muraoka, Morgan Stanley.

(interpreted) I am Muraoka from Morgan Stanley. Thank you for this opportunity. My first question is about slide 18, maybe I missed but corporate taxes impact from the Actos, I'd like to understand more clearly, which is not directly related but do you see the impact from second quarter and onward out of this?

And the second question is Ixazomib and Velcade bridging or switching, in 2016 you expect the launch of Ixazomib but a lot of exclusivity of Velcade will be in fiscal 2017.

And newly diagnosed MM approval whether that launch will be later than 2017? So considering this situation, how do you expect to fill that depth or the gap in 2017 when Velcade expires?

Thank you. So, I would answer the question regarding Ixazomib and Velcade and Rudolf will cover the first part of the question. One is important to mention that Ixazomib and Velcade will not have because of the medical profile of efficacy and safety, will not have exactly the same positioning for the treatment of multiple myeloma patients. But Velcade today -- about 48% of the patients treated by Velcade are in the induction phase and the rest is in later stage, either relapse or maintenance.

Ixazomib will probably be much more competitive in the maintenance phase and perhaps also in the induction phase. But clearly the profile of the two product is different. So, I think the introduction of a product like Ixazomib plus the other product which are coming in the multiple myeloma will probably change the way the treatment paradigm is done from induction to maintenance. And therefore we shouldn't see Velcade and Ixazomib as a one-one comparison, if you like. It might be possible that Velcade will still be used very much in the induction phase, for example, followed by Ixazomib. Maybe the combination will evolve as well because there is new player coming in. But in any case, we see Ixazomib as potentially a very important option to treat multiple myeloma patients on a long-term basis.

So then for your first question, the tax impact for Actos, of course the main impact will come after the settlement is paid out because at that point it will become a deductible expense. However, you referenced on slide number 18, we do have a small adjustment in the bridge of JPY2.7 billion related to the Actos tax impact. And so effectively and the way that works is that the taxable income of TPC stand-alone in Q1 was positive. However, the Actos loss for the full year will result in a negative taxable income for TPC and as a result of this reason we cannot claim the benefit of deductible donations and R&D tax credits this year.

And since this is directly related to the Actos case, we're treating that as an adjustment to core earnings. I hope that explains or it helps you with your question.

(interpreted) Regarding the past question -- regarding the past point I'd like to also have the comment about the (inaudible) countermeasures?

Well, I'm not sure we need countermeasures. I think [the police] has to demonstrate their added value with efficacy and safety profile and I think the doctors and the patient will decide if the efficacy, safety profile is good enough to take a position on the marketplace.

I don't want to comment more on a product of a competitor.

(Operator Instructions)

(interpreted) Thank you very much. It seems there are no more questions. So we would like to close today's session. We are closing the conference call. Thank you very much for your participation today.

Thank you for your taking time and that completes today's conference call. You may now disconnect your lines.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.